Creditors Seek Unburdened Borrowers

In search of quality collateral, bankers are expanding their credit offerings to previously forgotten groups. Students and all those eager for education are one of the targeted audiences

The only time clients can obtain a loan is when they actually do not need it. This slogan, which many entrepreneurs and citizens have come to believe when bankers assessed the credit risk of contracting a loan with them, does not apply to all categories of the population and legal entities – it has bypassed students and those eager for education and improvement. More and more Croatian students are studying according to the American standard, taking out loans to pay for their studies. The demand for student loans is constantly rising as taking out a loan to pay tuition is the only option for many students to study at private colleges and universities.

User Experiences

At the Zagreb School of Economics and Management, for example, tuition can be paid with a student loan that students of that school have often used for years. Marija Perić, head of ZŠEM’s marketing, says that most banks in Croatia offer student loans that cover the full amount of tuition for that study. The advantage of the loan is that it can be repaid immediately or at the latest one year after graduation. Thus, students take out a loan upon enrolling in their studies, which they later repay from their own income. ZŠEM educates easily employable personnel. Statistics from that school show that 40 percent of its students are employed even during their studies, and 94 percent within a year after graduation, so they have no difficulties repaying the loan.

– More and more students are choosing to finance their studies this way. This is proof of their seriousness, responsibility, and willingness to invest in their own future. In order for students to obtain a loan, they must meet the enrollment criteria for ZŠEM, after which we issue them a certificate based on which the bank approves the loan. The certificate we issue states the amount of tuition based on which the loan is taken, and the other conditions are negotiated with bank officials – says Perić.

She believes that student loans have great potential and that banks should work more on their promotion and recognize students as a potential client market niche that can provide long-term value to banks if their satisfaction is maintained. However, the benefits of student loans are not only for students and banks but also for private schools and colleges, which, thanks to these loans, have more students and pupils and greater profits.  

Purpose of the Loan

The demand for student loans is also reflected in bank data. Erste Bank, for example, approved about three and a half million kuna in student loans during 2015. These loans are not offered by RBA, but it has some other benefits for students. An education loan can be obtained for paying tuition at a college and for private secondary education, courses, specializations, and similar. Loan amounts vary from bank to bank, from 200 euros to 30,000 euros. Banks offer similar lending conditions, with slight differences in interest rates and loan repayment terms. At Hrvatska poštanska banka, which offers three types of loans, a loan for tuition, a loan for knowledge, sports, and travel, and a lombard loan, they are recording an increase in demand for student loans. The most interested in these loans are students in Zagreb and Osijek. The loan combination Diplomac is the most popular in Split, Osijek, Rijeka, and Zagreb, perhaps also because the interest rates for this type of loan are lower by up to 0.5 percent than the regular ones. HPB’s loan for tuition from 700 to 20,000 euros, payable in kuna with a currency clause, is intended for paying tuition for private secondary schools or gymnasiums, undergraduate, graduate, or postgraduate studies in the country or abroad. The interest rate is 5.66 percent with a repayment period of 13 to 96 months and a possible grace period of up to six months. The loan for knowledge, sports, and travel is intended for covering the costs of additional education in the country and abroad: seminars, courses, congresses, and the purchase of computer, sports, or recreational equipment or for travel. A loan of 2,000 to 12,000 kuna is approved with a repayment period of 13 to 24 months and an interest rate of 5.49 percent. HPB approves a lombard loan for students with a term deposit in euros. The repayment period is up to three years if the utilized loan is repaid in a lump sum, or up to 10 years if repaid in equal monthly installments. Minors represented by a legal representative or guardian as a joint debtor also have the right to the loan.

– The trend in demand for student loans is more pronounced at the beginning of the academic year – says Dražen Dumančić, assistant executive director of Public Relations and Marketing at Privredna banka Zagreb.

This bank offers PBZ Educa loans for paying tuition at private secondary schools and for undergraduate, graduate, postgraduate, or specialist studies in the country and abroad. The maximum loan amount for education is 25,000 euros in kuna equivalent, and the interest rate is variable, amounting to 5.63 percent or 5.50 percent. The repayment period for this loan is up to 10 years with a possible grace period of up to 12 months. The principal can start being repaid after graduation. In addition to proof of student status, the creditworthiness condition must also be met, which can be achieved by a creditworthy joint debtor. The users of loans for paying tuition for private secondary education are parents or guardians of the student for whom the tuition is paid. For loans up to 15,000 euros, no additional security instruments are required, but for larger amounts, additional security must be arranged – a guarantor or a life insurance policy with a cash value of five percent of the loan.

Subsidized Rates

The largest loan amount, 30,000 euros, is offered by Erste Bank. Loans for education from Erste Club, with a minimum amount of 2,000 euros and a maximum of thirty thousand, with a fixed variable interest rate or a variable interest rate, are intended for tuition in Croatia and abroad, but also for covering accommodation, food, study travel, textbooks, and equipment costs, etc. Up to 50 percent of the loan amount can be used for non-specific purposes if it finances tuition and education costs. If the loan repayment period is up to seven years, a fixed annual interest rate is agreed, which for clients with customer status is 5.60 percent. Loans with a repayment period of up to 10 years are approved with a variable interest rate, which for clients with customer status is 12M euribor plus 5.15 percentage points. If a life insurance policy is arranged, clients are granted loans with a 0.1 lower interest rate. A student wishing to apply for a loan must attach a document confirming their enrolled year of study or education and proof of expenses during their studies, and the loan is realized with a co-debtor, most often a parent. Student loans from Zagrebačka banka are intended for regular and part-time students, regardless of age or employment. Zaba also offers loans for financing other educational programs, such as foreign language courses, driving schools, and seminars. In this bank, the demand for student loans is constantly rising; loans for paying tuition are approved from 200 to 20,000 euros with interest rates of 5.47 percent, and loans for financing living expenses in monthly amounts from 70 to 700 euros with interest rates of 5.67 percent and a repayment period of up to 10 years. The principal of the loan is repaid only after graduation, with the possibility of deferring the first loan payment for up to 12 months. This is a loan without additional security; only creditworthiness is assessed, with the possibility of co-debtorship. Zagrebačka banka also collaborates with the University of Rijeka, the ‘Baltazar’ Polytechnic in Zaprešić, and the cities of Dubrovnik, Đurđevac, and Osijek, as well as with the Osijek-Baranja County, where student loans are more accessible to students due to subsidized interest rates and eased repayment conditions.